With a growing number of lenders switching to affordability-based lending, brokers have questioned its validity and the time spent per case.
Peter O’Donovan, mortgage manager at Bestinvest, argued that affordability-based lending was a lot harder to work out. He said: “Affordability seems to be a growing trend. However, it is making the process of setting up and completing a mortgage application more difficult. With the old system we could offer a set amount, such as three-and-a-half times income multiples.
“ Now it takes a lot more time to complete an application and we are reverting to the old system to provide a basis. Only Nationwide shows you a good way of predicting the affordability of a deal to a client.”
He went on to add: “For first-time buyers, judging affordability may prove more time-consuming, slowing the process down further.”
However, Kim Barrett, proprietor at KS Barrett & Associates, dismissed claims the affordability approach would be a hindrance to brokers trying to complete applications.
He said: “Most lenders complete credit ratings anyway so affordability-based lending goes on across the board. Any intermediary that is introducing a client sensibly should have no problem presenting cases on any affordability scheme.”
Harry Katz, principal at Norwest Consultants, admitted his preference for income multiple solutions but argued that no method is perfect. He said: “The old system is preferable because it takes interest rates into account and therefore ability to pay into account as well. It’s not perfect, nor is any other system, because if rates change once you have got your loan, you either sink or swim.”
